Just before the global announcement of the Covid-19 pandemic in early 2020, I funded a master’s thesis in Product Development thanks to a grant from the Finnish Foundation for Economic Education, known colloquially as LSR. Here’s a screencap that shows the first outcome from our analysis of founder interviews of Finnish startups entering African markets. Back in autumn 2019, East Africa felt like a great example of significant change in complexity and uncertainties in the operating environment compared to the well-situated stability of Finland (and the Nordics).
Today, the whole world has changed, and the “polycrisis” has become a household word. The volatile nature of complexity and uncertainty has increased, and climate-related conditions are not very stable either. The landscape of the operating environment is in flux, and extant strategies for investment planning and new market development face constantly changing conditions. This raises challenges for legacy data which may not be viable enough to be feasible, nor if I’m honest, very desirable, to use.
When complexity increases exponentially and not in a steady state – which itself can provide a means to forecast future conditions heuristically – participants in Finland leading the product development strategies for their technology startups were suddenly brought face to face with their blindspots in three key areas:
- Context: knowledge of the operating environment
- Lack of holistic understanding rendered visible by the change in circumstance
- Concurrent impact on resources – increase in time and costs for agile development since experimentation was now blindly flailing as frame of reference changed dramatically
This applies just as well in our current situation. Except that now, these three challenges are being faced even by companies not looking to go enter distant and very different markets.
Recent PESTEL analysis from the World Economic Forum shows this volatility in the difference in risks considered severe in the short term versus the long term planning horizon. Given that this survey was completed half a year ago in late 2022, these conditions still hold, particularly for those us closer to conflict zones affecting food security and energy costs.
However, the top risks all turn green – denoting the ongoing environmental crisis experienced across the entire planet – once we get out of the immediate period of time and look ahead. These risks do show up in the top 10 even in the two year horizon but are not being considered by the experts surveyed as critical as geopolitics and cost of living. Further to the point that things are changing from planning horizon to planning horizon is the lack of mention of the current top risk – cost of living, while geopolitics drops down in relative severity.
Why is product development strategy now at a critical juncture?
Perhaps it is due to Finnish policies and strategies that local organizations are facing increased pressure on their product development planning and strategies, but contemporary considerations such as circular economy and emissions reduction are factors at work which require a rethink of the way products (and services) are conceptualized and brought to market. The market too, has changed, as consumers are far more sensitive to these same considerations and well aware of their footprint on the natural living environment.
In common with other regions, technological forces such as the proliferation of easy to use generative tools powered by AI are also risk impacts although the WEF analysis seems to have overlooked the significant and disruptive potential of this on society. In manufacturing and industry, as well as utility service delivery, “smart” solutions powered by industrial internet and algorithms (I won’t quibble on naming and branding differences for the same thing targeting B2C vs B2B) are contributing their number crunching capacities to improve efficiencies in the entire life cycle of the products of industry, regardless of whether they target “consumers” or other businesses.
These are only a handful of the most visible factors acting on the “fuzzy front end of innovation” as this ambiguous opportunity space prior to the planning and development of new product definitions and market strategies. Others include supply chain reconfigurations accelerated in past handful of years by many GESTE factors, increased sensitivities to raw material selection and sourcing, energy supply and costs – for both production as well as end-use, not to mention demographic change as elders in society begin to outnumber youth.
While policymaking may not be imposing the same tight timelines for other European firms, the EU as a whole certainly is moving in the same direction. Finland’s just being the front bencher in class again, as is usual.
“… the Finnish Meteorological Institute this week warned of dry terrain and a “high risk” of forest fires in most of the country, with a “very high risk” in southwestern Finland and the Aaland islands in the Baltic Sea. […] in general, a warming climate is making the Nordic region more vulnerable to forest fires by making summers longer and winters shorter, prolonging the “vegetative” season when most precipitation evaporates or transpires rather than sinking deeper into the ground.” (source, 17th June 2023)
A “great transformation” for industry
Given that many path-to-market timelines – no matter how accelerated – tend to range from 9 to 15 months, it would be rare for any firm not in the (now unsustainable) fast fashion business to focus solely on the risks highlighted in the 2 year period. In Finland’s food retail sector, cheaper lines and brand extensions in response to the cost of living crisis were only able to show up on the shelves more than a year after the first impact of the conflict initiated by our biggest neighbour. Prices began shooting up late last spring without pause over the summer and autumn.
It took most of the past year for local supermarket chains – accustomed as they were to extreme stability of operating conditions – to recognize the disruptive impact of volatility on their pricing mechanism, based on a system design that was not recognized as overly sensitive to operating conditions until prices jumped to ridiculous extremes. It is clear that relative weighting of risks has to change.
Recently, I lived through a period where we could not afford tomatoes, cucumbers or lettuce – cooling foods that I’m now frankly gorging on since the warm weather is itself enough to bring their prices down to the other extreme. Regardless, the food basket cost was just one highly visible indicator of a period of transition that is now coming clear as a greater transformation of industrial and commercial operating conditions than simply a temporary blip or outlier within a context of relative stability – both of supplies as well as costs.
The complexities of the “foreign” now emerge in the domestic market
Now, we can see challenges in the current situation clearly reflected by increase in complexity and uncertainty, already identified by Finnish tech startups entering the East African market:
- Context: knowledge of the operating environment
- Lack of holistic understanding rendered visible by the change in circumstance
- Concurrent impact on resources – increase in time and costs for agile development since experimentation was now blindly flailing as frame of reference changed dramatically
An Opportunity for Disruptive Innovation
For many, this becomes an opportune moment to shift gears towards a greater transformation than simply implementing short term coping mechanisms or mitigations for interrupted supplies and rising energy costs. With two concurrent whole systems shocks occurring in series, the socio-economic system feels more plastic than it normally would given the traditional stability associated with the region.
People have emerged from the restrictions of the pandemic years with a greater commitment to health and wellbeing, not only their own but also that of all living things and the natural environment as a whole. Experiencing the global pandemic from a local perspective made clear the deeply interconnected nature of factors that affect our quality of life on earth, regardless of relative wealth or stability or education, and stripped out any veils across the extremely interdependent and complex nature of our socio-ecological-technical system.
Approaching it successfully requires awareness and preparation
The greatest danger would be to overlook the experience of the Finnish supermarket chains – can we afford to take a year to recognize that our systems are not designed for volatility and assume far too much stability all the while losing customers to cheaper substitutions or no purchases at all?
It has taken just over a year for an affordable version of packaged sandwich ham to arrive on the market and the SKU of the mayonnaise to change. There isn’t a mama mboga in the fresh produce sector in Nairobi who would permit such a length of time to pass before experimenting with different produce pricing and quality strategies to maintain revenue streams.
The nimbler response of a retailer accustomed to operating in high risk uncertain conditions may offer insights for tweaks to systems design. For this weaving together of local and indigenous knowledges with advanced technological prowess, a very deep understanding of the informal economic system is necessary.
But there’s more to this than simply adding insights from abroad. Blindspots are created by unrecognized path dependence on one single knowledge system and its metrics for gathering empirical evidence and the means for interpreting it. Expanding one’s ways of knowing and ways of thinking to enhance creativity and flexibility can solve that problem.
An upfront diagnosis of each product line from inception through to target customers may be required for holistic understanding of all the many factors I’ve listed today, contributing to the need for a full systems transformation of product development strategies, and thus, planning.
Next Steps
These tactics ensure the organization is future-proofed for increasing volatility and uncertainty adding to the complexity of operating conditions during this transitional period characterized as polycrisis, turbulence or flux.
- Actionable insights from existing commercial environments of complex uncertainty and volatility, for ex. firm behaviour in informal economic systems;
- Enhancing human capital through embrace of alternative ways of knowing and thinking, in addition to the scientific technological knowledge system; and
- Diagnosis of context and market specific risk assessment and path dependencies for each product development strategy and plan.
The three activities are not in any linear progression so much as a multi-pronged approach that acts as a booster program. It is suitable for both startups as well as SMEs and larger organizations and can be customized to need. Contact me to discuss our expertise in holistic product development strategies for environments of uncertainty and complexity.
